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The AES Corporation (NYSE: AES) announced today that it will restructure its corporate support and subsidiary business operations, in line with its strategy, which will result in additional cost savings. “The changes we announce today build on what we started a year ago, as we continue to streamline the organization to reflect our focus on platform expansions in fewer markets,” said Andrés Gluski, AES President and Chief Executive Officer. “Our goal is to minimize overhead and strengthen accountability, pulling all levers to meet our commitments while achieving world class operations in every market we serve.”
The reorganization will consolidate operations into market-oriented strategic business units under one Chief Operating Officer (COO). These changes are expected to yield an additional $45 million of recurring cost savings, increasing total run rate savings to $145 million for 2014 as compared to 2011. Of this incremental $45 million in savings, $25 million will be achieved in 2013. In addition, one-time restructuring expenses are forecasted to be approximately $20 million from 2012 through 2013.
The new Global Operations organization will be led by Andrew Vesey, currently Executive Vice President and COO of Global Utilities. Ned Hall, Executive Vice President and COO of Global Generation, intends to leave the Company by early next year. Also, as part of the reorganization, the Strategy group led by Gardner Walkup has been eliminated and its functions have been absorbed into the Corporate Planning and Investment Committee teams. “Ned made major contributions to AES over the last 24 years, particularly over the last few years, by spearheading our renewables and energy storage businesses,” said Gluski. “Gardner laid the foundation for the focused strategy we are now implementing.”
AES also disclosed a non-cash impairment charge in the range of $1.7 to $2.0 billion related to goodwill recorded in connection with the acquisition of DPL Inc. (DPL). During 2012 power prices in Ohio trended downward, compressing margins as customers increasingly moved towards competitive retail electric services. On October 5, 2012, DPL’s wholly owned regulated utility in Ohio filed for an Electric Security Plan with the Public Utilities Commission of Ohio. As a result of these developments, forecasted profitability and cash flow have been reduced and related impaired goodwill has been estimated pending finalization by year-end.